Is Oregon's School System Uniquely Bad?

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Photo: Oregon Education Association

Funding Oregon's school system with a new tax on business revenue is a major priority during this spring's legislative session. The funding crisis for Oregon's schools is nothing new, however — and despite decades of struggle to secure funding for Oregon's schools, the situation has not improved.

All of this begs the question: Are all states going through a similar struggle just to keep the lights on in their schools? And if not, what is it about Oregon that makes improving schools particularly hard?

For an answer, we looked at not only how much Oregon spends per student, but where it gets the money. Due to the constitutional amendment of Measure 5 in 1990, which severely limited property taxes, especially those used for schools, Oregon relies heavily on personal income tax to run its schools. A graph of per-pupil spending and income source shows how much of an outlier Oregon really is:

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Based on 2013 census numbers, Oregon relies on personal income tax for nearly 35% of school funding.

Oregon's relatively low per-pupil spending creates an ongoing unmet need, but the reliance on personal income tax revenue is the reason why our state feels it so acutely. Income taxes are much more volatile than sales or gross receipts taxes. Tax revenue makes a sharper decline when the economy slows. This volatility is further complicated by Oregon's "Kicker" law, where windfall revenue collected when the economy thrives cannot be saved for the inevitable slow times.

The proposed gross receipts tax, which taxes business revenue with certain exceptions and deductions, is by contrast relatively stable. Below, see the estimated impact the tax would have both on Oregon's per-pupil spending, and reliance on personal income taxes.

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The additional tax revenue would bring Oregon's per-pupil spending up to approximately the national average, but Oregon would still be an outlier in its reliance on income tax, along the vertical axis. The change looks like a step in the right direction though, in terms of properly funding our schools, and adding reliability to the funding process.

Note:

The relative weight of personal income tax is derived from the fraction of state revenue generated by income taxes multiplied by the percentage of state funding used to operate schools. In Oregon, most but not all school funding comes from the general fund. The mechanism for school funding is a little different in every state. Still, we think this metric provides a good way to understand how much each state relies on personal income tax revenue for school funding.

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Joel is a designer at Fat Pencil Studio